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A Report On Corporate Governance And Shareholder Activism

A Report On Corporate Governance And Shareholder Activism by James R. Copland and Margaret M. O’Keefe, Proxy Monitor

Executive Summary

In the last two decades, shareholders have gained power relative to corporate boards. One way shareholders exert influence over corporations is by introducing proposals that appear on corporate proxy ballots. In 2015, shareholders were both more active and more successful in these efforts:

  • The number of shareholder proposals is up. The average large company faced 1.34 shareholder proposals in 2015, up from 1.22 in 2014. This is the highest level of shareholder-proposal activity since 2010. The increase in 2015 has been driven largely by the New York City pension funds’ push for “proxy access,” which would give large, long-term shareholders the right to nominate their own candidates for director on corporate proxy ballots.
  • The Securities and Exchange Commission has been more lenient in allowing shareholder proposals on the ballot. Another reason for the uptick in shareholder-proposal activity in 2015 is a more permissive stance adopted by the SEC in assessing shareholder proposals’ appropriateness for proxy ballots. In January 2015, the agency suspended the application of its “conflicting proposals” rule—and several companies this year faced shareholder proposals that conflicted with management proposals on the ballot. In 2015, the SEC issued 82 letters assuring companies that it would take no action if they excluded a shareholder proposal from their proxy ballot, down from 116 in 2014; the agency declined to issue no-action letters on 68 petitions in 2015, up from 50 in 2014.
  • A small group of shareholders dominates the shareholder-proposal process. As in 2014, one-third of all shareholder proposals in 2015 were...